There have been significant advancements in the area of biotechnology recently that have the potential to create new investment opportunities. Organovo Holdings (ONVO.PK) has been focusing on 3D bioprinting of human tissue for use in medical research and regenerative therapies. Synergy Pharmaceuticals' (SGYP) leading compound plecanatide has been showing promise in treating patients with idiopathic constipation and constipation predominant irritable bowel syndrome. Halozyme Therapeutics' (HALO) has been seeing increased success with its MabThera formulation. Offering MabThera subcutaneously could allow patients to spend less time receiving the formulation in infusion centers. Acorda Therapeutics (ACOR) expects net revenue from Ampyra, which improves the ability of patients with multiple sclerosis to walk, expects revenue of $255 million to $275 million in 2012.
3D printing has been successfully used in the health care industry for the manufacture of prosthetic limbs, custom hearing aids and dental fixtures. But advances in technology mean that more complex structures such as human tissue can now be created. Organovo Holdings, a San Diego-based company that focuses on regenerative medicine, uses 3D printers, called bioprinters, to produce human tissue for medical research and regenerative therapies. Traditional 3D printing, which is also known as additive manufacturing, is a process by which three dimensional solid objects can be manufactured from a digital model. 3D printing creates an object by laying down successive layers of material such as plastic, ceramics, glass or metal to print an object. Companies such as Boeing (BA) and General Electric (GE) use the process to manufacture parts. However, Bioprinters use a "bio-ink" made of living cell mixtures to form human tissue and the bio-ink is used to build a 3D structure of cells, layer by layer, to form tissue. Eventually, researchers hope to use the process to manufacture organs for organ replacement.
Organovo, with the assistance of Australian company Invetech, was the first company to launch a commercial 3D bioprinter. Organovo's NovoGen MMX Bioprinter was selected as one of the "Best Inventions of 2010" by Time Magazine. The company originally intended to sell its printer on the market but changed its business model to make tissues for drug companies. Organovo has partnerships with Pfizer (PFE) and United Therapeutics (UTHR). Organovo has made blood vessels, lung tissue and recreated tumors using bio-printing, and is focusing on customizing tissue for all types of medical research. Testing with 3D tissues provides more precise results and allows for pharmaceutical companies to determine failed drugs early before wasting more money in development. The spending on clinical trials is estimated at over $31 billion every year.
For the third quarter of 2012, Organovo's total revenues of approximately $469,200 were 102% or $237,300 higher than the revenues seen in the same quarter in 2011. Collaborative research revenues of approximately $373,800 grew by $141,800 or 61% year-on-year. Grant revenue for the quarter of approximately $95,500 increased by the same amount over the same quarter of 2011. Though the company reported net earnings of approximately $38.5 million for the quarter, these earnings were mainly the result of a non-cash adjustment resulting from the change in fair value of its warrant liabilities. On July 9th, 2012, Organovo announced the receipt of two issued patents which were made up of a patent to which the company owns the exclusive license from the University of Missouri, and the issuance in the U.K. of the company's first assigned patent.
There's plenty of hype surrounding 3D printing technology, and some people talk of it as the "third industrial revolution". There are publicly traded companies in the 3D technology business as well as the 3D software modeling company Autodesk (ADSK). However, Organovo currently has no competition in the bio-printing market niche, and the company can use this to advantage in obtaining a premium for its stock price while using its patent protection to block competitive entry into its market. The company is in stable financial position as it holds approximately $8.5 million in cash and cash equivalents and liabilities of around $900,000. During the first six months of 2012, the company used $5.4 million to fund operations, and expects to spend another $3 million for the remainder of 2012. On average in 2012, the company had an estimated monthly burn rate of $700,000, which means that it has sufficient funding up in the middle of 2013 to carry on its operations.
Organovo has seen a substantial drop in its stock price and is currently quoting at around $2.13 after having hit a high near $10 in June. Organovo is an intriguing investment opportunity in what promises to be a hot area of both technology and biotech. Successful progress towards FDA approval not only means that the stock price is likely to jump, but also turns the company into a prime acquisition target for a larger company. Investors looking at the 3D Bioprinting space should consider adding Organovo to their portfolio today.
Summer Street Research Partners has initiated coverage of Synergy Pharmaceuticals with a Buy rating and 12-month price target of $9. Synergy Pharmaceuticals is a New York-based biopharmaceutical company which focuses on the development of drugs to treat gastrointestinal disorders and diseases. Its leading compound, plecanatide, is being evaluated in a Phase II/III trial (ongoing) in patients with chronic idiopathic constipation and in patients with constipation predominant irritable bowel syndrome. A Phase IIb clinical trial is also planned. The second compound, SP-333, a second-generation GC-C receptor analog, expects to have an investigational new drug (IND) submitted for treating ulcerative colitis in the third quarter of 2012.
Summer Street believes that Synergy's lead compound, plecanatide, has the potential to become the second, best-in class, guanylate cyclase-C (GC-C) receptor agonist for treating chronic idiopathic constipation (CIC) and irritable bowel syndrome with constipation (IBS-C). They expect positive top line data from an ongoing Phase II/III CIC trial, which is expected in the fourth quarter of 2012, to provide significant upside in the near term. I expect positive data from a plecanatide Phase II/III trial in CIC to drive upside while the ongoing Phase II/III CIC trial of plecanatide should report positive data by the fourth quarter of this year. This would serve as a critical near-term catalyst for Synergy stock. The optimism surrounding this program is based on promising preliminary efficacy of plecanatide demonstrated in a randomized, placebo controlled Phase IIa trial in CIC patients (that appears highly competitive with competing drug linaclotide), a validated mechanism of action and a potentially improved safety profile of linaclotide with minimal diarrhea.
Plecanatide's potential succepss in IBS-C could significantly expand the market opportunity. Synergy plans to initiate a randomized Phase IIb trial to evaluate plecanatide in patients with IBS-C in the third quarter of this year with the expectation of reporting top line data in the third quarter of next year. Given the validated mechanism of action of this class of compound in IBS-C and preliminary efficacy of plecanatide in improving abdomen symptoms/discomfort in the Phase IIa trial in CIC patients, there is ample potential for plecanatide to demonstrate proof of the concept in the Phase II IBS-C patients as well.
Plecanatide addresses a significant unmet medical need and has a huge market opportunity. If successful, plecanatide has the potential to become a best-in-class oral treatment for both CIC and IBS-C. Both CIC and IBS-C are large unmet medical needs that are not sufficiently served with present treatments. The estimated peak sales potential for plecanatide in the U.S. alone is in the region of $650 million with a risk-adjusted net present value of around $478 million with a combined probability of success of around 60%. It is also likely that Synergy could be an attractive acquisition target with plecanatide as a potential best-in-class compound targeting the large unmet medical needs of CIC and IBS-C, full worldwide rights for all its compounds, and a novel drug discovery engine to replenish its pipeline. Milestones and catalysts coming up in the near-term future are as follows: Synergy plans the completion of patient enrollment in the pivotal Phase II/III trial of plecanatide in CIC. There is the potential to initiate a randomized, placebo-controlled Phase IIb trial evaluating plecanatide in patients with IBS-C filing of an IND for SP-333 in patients with ulcerative colitis. The reporting of top line results from a Phase II/III trial of plecanatide in CIC is expected. The potential for reporting top line data from the Phase IIb trial of plecanatide in patients with IBS-C is present. Positive results from any of these would have a favorable impact on the share price.
Synergy Pharmaceuticals does not have any approved drugs currently, and Plecanatide is its most advanced experimental product, though the company also recently started clinical testing of a drug candidate called SP-333 as a treatment for ulcerative colitis. Canaccord Genuity analyst Ritu Baral said there is a real need for treatments for chronic constipation that isn't being helped by current drugs, and plecanatide may fill that need. Baral has also maintained a "Buy" rating on Synergy shares and a price target of $7. Synergy trades at just over $5, and the catalysts described above could significantly increase its share value by several dollars over the next several quarters. Synergy looks like an interesting and highly promising company. Investors looking at the biotech sector should consider buying this stock.
Halozyme Therapeutics recently announced that Roche Holding (RHHBY.OB) has submitted a line extension application to the European Medicines Agency for a subcutaneous (SC) formulation of MabThera (rituxumab). The filing of the application has triggered a $4 million milestone payment to Halozyme under the License and Collaboration Agreement between Halozyme and Roche. "This regulatory filing brings patients and physicians one step closer to an enhanced treatment option for Non-Hodgkin Lymphoma," said Gregory I. Frost, Ph.D., Halozyme's President and Chief Executive Officer. He also said, "Offering a subcutaneous formulation of MabThera could provide patients with a therapy which is less invasive, shortens administration times and potentially reduces healthcare costs". Roche recently reported positive data from two clinical studies of MabThera given by subcutaneous injection at the 54th annual meeting of the American Society of Hematology (ASH). Both studies have demonstrated that a fixed dose of MabThera can be administered subcutaneously, potentially allowing patients to spend less time in infusion centers receiving their MabThera treatment. Currently, MabThera is available as an IV formulation and utilizes Halozyme's Enhanze Technology, which enables the injection of large volumes of a medication under the skin.
Halozyme Therapeutics is dedicated to developing and commercializing innovative products that advance patient care. With a diversified portfolio of enzymes that target the extracellular matrix, the company's research focuses primarily on a family of human enzymes, known as hyaluronidases, which increase the absorption and dispersion of biologics. Halozyme's pipeline addresses therapeutic areas, such as diabetes, oncology and dermatology that have significant unmet medical need. The company markets Hylenex recombinant (hyaluronidase human injection) and has partnerships with Roche, Baxter (BAX) and ViroPharma (VPHM). The net loss for the third quarter of 2012 was $(20.0) million, or $(0.18) per share, compared with a net income for the third quarter of 2011 of $5.2 million, or $0.05 per share. The net loss for the nine months ended September 30, 2012 was $(49.1) million, or $(0.44) per share, compared to a net loss of $(1.4) million, or $(0.01) per share, for the comparable period in 2011.Revenues for the third quarter of 2012 were $5.3 million, compared to $22.9 million for the same quarter of the previous year and consisted mainly of research and development reimbursements from partners. Cash and cash equivalents were $87.6 million as of September 30th, 2012, compared with $66.3 million as of September 30th, 2011. Net cash used in the third quarter of 2012 was approximately $14.4 million and cash burn guidance for 2012 remains at $60 to $65 million.
The anticipated milestones through 2013 include the following: Roche intends to present data from the Phase III MabThera SC trial and file the marketing authorization application (MAA) with the European Medicines Agency (EMA) in 2012. The company plans to present HTI-501 clinical proof-of-concept data. A decision regarding Herceptin SC MAA from the EMA is expected. The company expects to complete its Cinryze SC+rHuPH20 Phase II study. Halozyme also expects to initiate Phase 4 studies to support use of Hylenex with insulin pumps. It intends to present data from the run-in cohorts of the PEGPH20 Phase II program in oncology and continue with the randomized portion of the trial. Positive data from any of these milestones would have a favorable impact on the share price.
Halozyme's technology speeds up injection, and some cancer therapies can be given to the patient in minutes instead of hours. It allows the injection of large volumes of a medication under the skin faster, while reversibly breaking down a gel-like substance (hyaluronan) that forms a barrier in the tissues between cells under the skin. In this manner, large molecules (as large as 200 nanometers) may pass freely through the subcutaneous space. Roche's Herceptin is a very large molecule and is currently infused. By using Halozyme's enzyme, many treatments that can now only be infused could be injected in the future, thereby increasing convenience for the patient, boosting efficacy, and reducing cost. This company is a relatively lower risk investment than most biotechs because it is not developing a new drug or treatment but a drug delivery system. If you can live with the risk, you could consider an investment in the stock.
Zacks Equity Research recently initiated coverage on commercial-stage biopharmaceutical company Acorda Therapeutics with a Neutral recommendation and a target price of $25.00. Acorda is focused on the development and commercialization of novel treatments that improve neurological function in people suffering from multiple sclerosis, spinal cord injury and other nervous system disorders. The January 2010 FDA approval of Ampyra was a major achievement for Acorda and, according to the company, is the first and only product approved for the improvement of walking in multiple sclerosis patients. Ampyra is the key growth driver at Acorda. The company expects net Ampyra revenue in the range of $255 million to $275 million in 2012. Ampyra also has the potential to be approved for additional indications. The company is currently studying Ampyra in Phase II proof-of-concept studies for cerebral palsy (results are expected by the end of 2012) and post-stroke deficits (results are expected in early 2013).
Analysts are positive on Acorda's June 2009 agreement with Biogen Idec (BIIB) for the development and commercialization of Fampyra (ex-US trade name of Ampyra) in markets outside the U.S. In addition to receiving an upfront payment of $110 million, Acorda is entitled to receive milestone payments as well as double-digit tiered royalties. Biogen Idec has plenty of expertise and a strong presence in the multiple sclerosis market, so it should be a suitable partner for Acorda. Ampyra sales have not met expectations, and sales were disappointing in the first quarter of 2012. Although there was an improvement in the second quarter of 2012, it remains to be seen whether this can be sustained and unfavorable reimbursement, and pricing issues in the EU could also affect Fampyra royalties. There is concern about the company's dependence on the product for growth because Zanaflex, another product in Acorda's portfolio, is facing generic competition, and no significant contribution to revenue is expected. In addition, the company has several interesting pipeline drugs, but they are all early-stage, and it will be several years before revenues start to flow.
Acorda reported GAAP net income of $9.6 million for the quarter ended September 30th, 2012, or earnings per share (EPS) of $0.24 per diluted share, including share-based compensation charges totaling $5.6 million. GAAP net income in the same quarter of 2011 was $18.9 million, or EPS of $0.47 per diluted share, including share-based compensation charges totaling $5.1 million, net milestone revenue of $23.3 million relating to Biogen Idec's receipt of conditional approval from the European Commission for Fampyra and accounting adjustments totaling $15.5 million relating to Zanaflex Capsules due to the patent infringement trial decision. Non-GAAP net income, before share-based compensation charges, for the quarter ended September 30th, 2012 was $15.2 million, or EPS of $0.38 per diluted share. Non-GAAP net income in the same quarter of the previous year, before share-based compensation charges, net milestone revenue and accounting adjustments relating to Zanaflex Capsules due to the Apotex patent infringement trial court decision, was $16.2 million or EPS of $0.40 per diluted share. For the quarter ended September 30th, 2012, cash, cash equivalents and short-term and long-term investments were $318.7 million, an increase of $15.7 million over the preceding quarter.
Investors looking at Acorda should wait until future growth prospects become more clear, but current investors should hold onto this stock.